Bankruptcy & Children's Vehicles

The effect of bankruptcy on your children's vehicles.

As you consider filing for bankruptcy you may wonder what effect the case will have on your children's cars. The U.S. Bankruptcy Code establishes how a bankruptcy case impacts your family generally and the ownership interests of different members of your immediate family in property.

Title

If the titles to vehicles used by your children are in your name, they will be included as assets in your bankruptcy case and subject to sale to satisfy debt.

Children's Funds

If you can demonstrate that vehicles were purchased with money earned by your children, and the cars are titled in their names, these vehicles will be excluded from your bankruptcy case.

Exemption

Exemption law generally permits you to keep one automobile when filing for bankruptcy. You cannot extend these exemptions to multiple vehicles.

Chapter 13

If vehicles used by your children legally are owned by you, a Chapter 13 bankruptcy is the best alternative if you want to keep these cars. Through Chapter 13 you are able to pay off your debt through a court supervised payment plan over the course of 2 to 5 years.

Misconceptions

A common misconception is that a debtor in bankruptcy is able to claim an exemption of one car for each family member. If the debtor is the owner of these vehicles, only a single exemption is available.

References

• Cornell Law School: U.S. Bankruptcy Code
• "The Glannon Guide to Bankruptcy"; Nathalie Martin; 2006
• Cornell Law School: Bankruptcy Overview

Resources

• American Bar Association: Bankruptcy & Insolvency Litigation Committee